How does the Continuous Growth of Domestic Polysilicon Supply in April-May Affect the Upstream Market?

SHANGHAI, May 19 (SMM) - According to SMM statistics, Chinese polysilicon output was about 114,000 mt in April, up 2.7% MoM. The output is expected to rise to 117,000 mt in May based on the producers' production schedules. How come the supply of polysilicon has continued to grow amid the falling prices? How will it affect the PV upstream market?

First, SMM survey shows that polysilicon companies maintained high production because of the considerable profits even though polysilicon prices kept dropping. Specifically, the cost of leading polysilicon producers was about 60 yuan/kg, and that of some silicon rod enterprises stood at nearly 50 yuan/mt. These figures are much lower than the polysilicon sales prices of 140 yuan/kg, allowing producers to enjoy healthy profits. Second, the bearish polysilicon enterprises, especially the new ones, had to maintain a high operating rate and high shipments to recoup their costs as soon as possible. Third, the new polysilicon projects, such as those owned by GCL in Inner Mongolia, the Runyang polysilicon plant, and Daqo New Energy, ramped up the overall production.

Naturally, silicon wafer companies became more prudent amid the expanding supply and the falling prices of polysilicon, which pushed up the polysilicon inventories further. As of last week, domestic polysilicon inventory neared 110,000 mt, which had a certain negative impact on polysilicon prices.

However, although polysilicon prices were on a downward track, some first-tier polysilicon companies held their quotes firm at 150 yuan/kg last weekend, and others also kept their quotations around 140 yuan/kg. In the meantime, silicon wafer companies were cautious about purchasing polysilicon rather than totally refraining from purchasing, which still offered certain support for polysilicon prices.

But the stability of polysilicon prices is only temporary. SMM believes that the oversupply of polysilicon and the dropping silicon wafer prices will drag down polysilicon prices.